Units
$10 principal amount per unit CUSIP No. |
Pricing Date*
Settlement Date* Maturity Date* |
October , 2022
November , 2022 January , 2024 |
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*Subject to change based on the actual date the notes are priced for initial sale to the public (the pricing date)
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BofA Finance LLC
Capped Notes with Absolute Return Buffer Linked to the Bloomberg Commodity IndexSM
Fully and Unconditionally Guaranteed by Bank of America Corporation
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Maturity of approximately 14 months
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1-to-1 upside exposure to increases in the Index, subject to a capped return of [13.00% to 23.00%]
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A positive return equal to the absolute value of the percentage decline in the level of the Index only if the Index does not decline by more than 10% (e.g., if the negative return of the Index is -5.00%, you will receive a positive return of +5.00%)
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1-to-1 downside exposure to decreases in the Index beyond a 10.00% decline, with up to 90.00% of your principal at risk
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All payments occur at maturity and are subject to the credit risk of BofA Finance LLC, as issuer of the notes, and the credit risk of Bank of America Corporation, as guarantor of the notes
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No periodic interest payments
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In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.05 per unit. See Structuring the Notes.
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Limited secondary market liquidity, with no exchange listing
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Per Unit
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Total
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Public offering price(1)
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$10.00
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$
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Underwriting discount(1)
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$0.175
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$
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Proceeds, before expenses, to BofA Finance
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$9.825
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$
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(1)
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For any purchase of 300,000 units or more in a single transaction by an individual investor or in combined transactions with the investor’s household in this offering, the public offering price and the underwriting discount will be $9.95 per unit and $0.125 per unit, respectively. See Supplement to the Plan of Distribution, Conflicts of Interest below.
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Are Not FDIC Insured
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Are Not Bank Guaranteed
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May Lose Value
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Terms of the Notes
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Redemption Amount Determination
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Issuer:
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BofA Finance LLC (BofA Finance)
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On the maturity date, you will receive a cash payment per unit determined as follows:
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Guarantor:
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Bank of America Corporation (BAC)
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Principal Amount:
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$10.00 per unit
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Term:
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Approximately 14 months
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Market Measure:
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The Bloomberg Commodity IndexSM (Bloomberg symbol: BCOM)
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Starting Value:
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The closing level of the Index on the pricing date.
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Ending Value:
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The closing level of the Index on the scheduled calculation day. The calculation day is subject to postponement in the event of Market Disruption Events, as described beginning on page PS-22 of the accompanying product supplement.
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Threshold Value:
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90.00% of the Starting Value, rounded to four decimal places.
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Participation Rate:
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100%
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Capped Value:
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[$11.30 to $12.30] per unit, which represents a return of [13.00% to 23.00%] over the principal amount. The actual Capped Value will be determined on the pricing date.
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Calculation Day:
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Approximately the fifth scheduled Market Measure Business Day immediately preceding the maturity date.
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Fees and Charges:
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The underwriting discount of $0.175 per unit listed on the cover page and the hedging related charge of $0.05 per unit described in Structuring the Notes on page TS-16.
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Calculation Agent:
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BofA Securities Inc. (BofAS), an affiliate of BofA Finance.
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Capped Notes with Absolute Return Buffer
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TS-2
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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●
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Product supplement COMM LIRN-1 dated July 15, 2021:
https://www.sec.gov/Archives/edgar/data/70858/000119312521216586/d218238d424b5.htm |
●
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Series A MTN prospectus supplement dated December 31, 2019 and prospectus dated December 31, 2019:
https://www.sec.gov/Archives/edgar/data/70858/000119312519326462/d859470d424b3.htm |
You may wish to consider an investment in the notes if:
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The notes may not be an appropriate investment for you if:
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You anticipate that the Index will either increase moderately from the Starting Value to the Ending Value or decrease from the Starting Value to an Ending Value that is at or above the Threshold Value.
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You are willing to risk a substantial loss of principal and return if the Index decreases from the Starting Value to an Ending Value that is below the Threshold Value.
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You accept that the return on the notes will be capped.
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You are willing to forgo the interest payments that are paid on conventional interest bearing debt securities.
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You are willing to forgo the rights and benefits of owning the commodities or futures contracts included in, or tracked by, the Index.
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You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our and BAC’s actual and perceived creditworthiness, BAC’s internal funding rate and fees and charges on the notes.
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You are willing to assume our credit risk, as issuer of the notes, and BAC’s credit risk, as guarantor of the notes, for all payments under the notes, including the Redemption Amount.
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You believe that the Index will decrease from the Starting Value to an Ending Value that is below the Threshold Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return.
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You seek 100% principal repayment or preservation of capital.
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You seek an uncapped return on your investment.
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You seek interest payments or other current income on your investment.
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You want to receive the rights and benefits of owning the commodities or futures contracts included in, or tracked by, the Index.
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You seek an investment for which there will be a liquid secondary market.
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You are unwilling or are unable to take market risk on the notes, to take our credit risk, as issuer of the notes, or to take BAC’s credit risk, as guarantor of the notes.
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Capped Notes with Absolute Return Buffer
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TS-3
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Capped Notes with Absolute Return Buffer
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This graph reflects the returns on the notes, based on the Participation Rate of 100.00%, the Threshold Value of 90% of the Starting Value and a hypothetical Capped Value of $11.80 per unit (the midpoint of the Capped Value range of [$11.30 to $12.30]). The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the Index.
This graph has been prepared for purposes of illustration only.
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Ending Value
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Percentage Change from the Starting Value to the Ending Value
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Redemption Amount per Unit
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Total Rate of Return on the Notes
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0.00
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-100.00%
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$1.00
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-90.00%
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50.00
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-50.00%
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$6.00
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-40.00%
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75.00
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-25.00%
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$8.50
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-15.00%
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80.00
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-20.00%
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$9.00
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-10.00%
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85.00
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-15.00%
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$9.50
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-5.00%
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90.00(1)
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-10.00%
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$11.00
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10.00%
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95.00
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-5.00%
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$10.50
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5.00%
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97.00
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-3.00%
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$10.30
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3.00%
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100.00(2)
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0.00%
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$10.00
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0.00%
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105.00
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5.00%
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$10.50
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5.00%
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118.00
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18.00%
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$11.80(3)
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18.00%
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120.00
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20.00%
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$11.80
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18.00%
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135.00
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35.00%
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$11.80
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18.00%
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160.00
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60.00%
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$11.80
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18.00%
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180.00
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80.00%
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$11.80
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18.00%
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200.00
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100.00%
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$11.80
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18.00%
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(1)
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This is the hypothetical Threshold Value.
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(2)
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The hypothetical Starting Value of 100.00 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value for the Index.
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(3)
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Any positive return based on the appreciation of the Index cannot exceed the return represented by the Capped Value.
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Capped Notes with Absolute Return Buffer
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TS-4
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Example 1
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The Ending Value is 80.00, or 80.00% of the Starting Value:
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Starting Value: 100.00
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Threshold Value: 90.00
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Ending Value: 80.00
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Redemption Amount per unit
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Example 2
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The Ending Value is 97.00, or 97.00% of the Starting Value:
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Starting Value: 100.00
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Threshold Value: 90.00
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Ending Value: 97.00
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Redemption Amount per unit. Since the Ending Value is less than the Starting Value but equal to or greater than the Threshold Value, the Redemption Amount for the notes will be the principal amount plus a positive return equal to the absolute value of the negative return of the Market Measure.
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Example 3
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The Ending Value is 105.00, or 105.00% of the Starting Value:
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Starting Value: 100.00
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Ending Value: 105.00
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Redemption Amount per unit
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Example 4
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The Ending Value is 160.00, or 160.00% of the Starting Value:
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Starting Value: 100.00
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Ending Value: 160.00
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= $16.00, however, because any positive return based on the appreciation of the Market Measure cannot exceed the return represented by Capped Value, the Redemption Amount will be $11.80 per unit
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Capped Notes with Absolute Return Buffer
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TS-5
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Depending on the performance of the Market Measure as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
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Your potential for a positive return based on the depreciation of the Market Measure is limited. The absolute value return feature applies only if the Ending Value is less than the Starting Value but greater than or equal to the Threshold Value. Because the Threshold Value is 90.00% of the Starting Value, any positive return due to the depreciation of the Market Measure is limited to 10.00%. Any decline in the Ending Value from the Starting Value by more than 10.00% will result in a loss, rather than a positive return, on the notes.
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Your investment return based on any increase of the Market Measure is limited to the return represented by the Capped Value.
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Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
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Payments on the notes are subject to our credit risk, and the credit risk of BAC, and actual or perceived changes in our or BAC’s creditworthiness are expected to affect the value of the notes. If we and BAC become insolvent or are unable to pay our respective obligations, you may lose your entire investment.
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Your investment return may be less than a comparable investment directly in the Market Measure or the related commodity.
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We are a finance subsidiary and, as such, have no independent assets, operations or revenues.
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BAC’s obligations under its guarantee of the notes will be structurally subordinated to liabilities of its subsidiaries.
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The notes issued by us will not have the benefit of any cross-default or cross-acceleration with other indebtedness of BofA Finance or BAC; and events of bankruptcy or insolvency or resolution proceedings relating to BAC and covenant breach by BAC will not constitute an event of default with respect to the notes.
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The initial estimated value of the notes considers certain assumptions and variables and relies in part on certain forecasts about future events, which may prove to be incorrect. The initial estimated value of the notes is an estimate only, determined as of a particular point in time by reference to our and our affiliates’ pricing models. These pricing models consider certain assumptions and variables, including our credit spreads, and those of BAC, BAC’s internal funding rate on the pricing date, mid-market terms on hedging transactions, expectations on interest rates and volatility, price-sensitivity analysis, and the expected term of the notes. These pricing models rely in part on certain forecasts about future events, which may prove to be incorrect.
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The public offering price you pay for the notes will exceed the initial estimated value. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for them and lower than the initial estimated value. This is due to, among other things, changes in the level of the Index, changes in BAC’s internal funding rate, and the inclusion in the public offering price of the underwriting discount and the hedging related charge, all as further described in Structuring the Notes on page TS-16. These factors, together with various credit, market and economic factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market and will affect the value of the notes in complex and unpredictable ways.
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The initial estimated value does not represent a minimum or maximum price at which we, BAC, MLPF&S, BofAS or any of our other affiliates would be willing to purchase your notes in any secondary market (if any exists) at any time. The value of your notes at any time after issuance will vary based on many factors that cannot be predicted with accuracy, including the performance of the Market Measure, our and BAC’s creditworthiness and changes in market conditions.
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A trading market is not expected to develop for the notes. None of us, BAC, MLPF&S or BofAS is obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase the notes at any price in any secondary market.
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BAC and its affiliates’ hedging and trading activities (including trades related to components of the Index), and any hedging and trading activities BAC or its affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
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There may be potential conflicts of interest involving the calculation agent, which is an affiliate of ours. We have the right to appoint and remove the calculation agent.
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Capped Notes with Absolute Return Buffer
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TS-6
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Bloomberg Index Services Limited may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
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Future prices of the Index components that are different from their current prices may have a negative effect on the level of the Index, and therefore the value of the notes.
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Ownership of the notes will not entitle you to any rights with respect to any commodities or futures contracts or included in, or tracked by, the Index.
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An investment linked to commodity futures contracts is not equivalent to an investment linked to the spot prices of physical commodities.
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The notes will not be regulated by the U.S. Commodity Futures Trading Commission.
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The Index includes futures contracts traded on foreign exchanges that are less regulated than U.S. markets and may involve different and greater risks than trading on U.S. exchanges.
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Suspensions or disruptions of market trading in the commodities or futures contracts included in, or tracked by, the Index may adversely affect the value of the notes.
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Legal and regulatory changes could adversely affect the return on and value of your notes.
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The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See Summary Tax Consequences below and U.S. Federal Income Tax Summary beginning on page PS-28 of the accompanying product supplement
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Capped Notes with Absolute Return Buffer
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TS-7
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Capped Notes with Absolute Return Buffer
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TS-8
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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The product, risk and operations committee provides direct governance and is responsible for the first line of controls over the creation, design, production and dissemination of benchmark indices, strategy indices and fixings administered by BISL, including the Index. The product, risk and operations committee is composed of Bloomberg personnel with significant experience or relevant expertise in relation to financial benchmarks. Meetings are attended by Bloomberg legal & compliance personnel. Nominations and removals are subject to review by Bloomberg’s benchmark oversight committee, discussed below.
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The oversight function is provided by the benchmark oversight committee. The benchmark oversight committee is independent of the product, risk and operations committee and is responsible for reviewing and challenging the activities carried out by the product, risk and operations committee. In carrying out its oversight duties, the benchmark oversight committee receives reports of management information both from the product, risk and operations committee as well as Bloomberg legal and compliance members engaged in second level controls.
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Capped Notes with Absolute Return Buffer
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TS-9
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Commodity
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Designated Contract
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Trading Facility
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2022 Final Commodity Index Percentages (%)
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Aluminium
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High Grade Primary Aluminium
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LME
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4.2457680%
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Coffee
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Coffee C
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ICE Futures U.S.
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2.7333550%
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Copper
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Copper
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COMEX
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5.3982920%
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Corn
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Corn
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CBOT
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5.5899030%
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Cotton
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Cotton No. 2
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ICE Futures U.S.
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1.5032870%
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WTI Crude Oil
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Light, Sweet Crude Oil
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NYMEX
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8.0368820%
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Brent Crude Oil
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Oil (Brent Crude Oil)
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ICE Futures Europe
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6.9631180%
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Gold
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Gold
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COMEX
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15.0000000%
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Ultra-Low-Sulfur Diesel (Heating Oil)
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ULS Diesel (HO)
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NYMEX
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2.0526330%
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Lean Hogs
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Lean Hogs
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CME
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1.7546500%
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Live Cattle
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Live Cattle
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CME
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3.5807520%
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Low Sulphur Gas Oil
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Low Sulphur Gas Oil (QS)
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ICE Futures Europe
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2.6496240%
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Natural Gas
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Henry Hub Natural Gas
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NYMEX
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7.9548670%
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Nickel
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Primary Nickel
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LME
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2.7134270%
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Silver
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Silver
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COMEX
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4.7468930%
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Soybean Meal
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Soybean Meal
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CBOT
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3.5200260%
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Soybean Oil
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Soybean Oil
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CBOT
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3.1716110%
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Soybeans
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Soybeans
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CBOT
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5.7888440%
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Sugar
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Sugar No. 11
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ICE Futures U.S.
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2.7943260%
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Unleaded Gasoline
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Reformulated Blendstock for Oxygen Blending (RBOB) Gasoline
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NYMEX
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2.1728010%
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Wheat (Chicago)
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Soft Wheat
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CBOT
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2.8463610%
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Wheat (Kansas City HRW)
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Hard Red Winter Wheat
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CBOT
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1.6636530%
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Zinc
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Special High Grade Zinc
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LME
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3.1189270%
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Capped Notes with Absolute Return Buffer
|
TS-10
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Commodity Group
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Commodity
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Energy:
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Crude Oil (WTI and Brent)
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ULS Diesel (HO)
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Low Sulphur Gas Oil
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Natural Gas
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Unleaded Gasoline (RBOB)
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Precious Metals:
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Gold
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Platinum
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Silver
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Industrial Metals:
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Aluminium
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Copper
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Lead
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Nickel
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Tin
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Zinc
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Livestock:
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Live Cattle
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Lean Hogs
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Grains:
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Corn
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Soybeans
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Soybean Meal
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Soybean Oil
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Wheat (Chicago and KC HRW)
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Softs:
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Cocoa
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Coffee
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Cotton
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Sugar
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Primary Commodity
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Derivative Commodities
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Crude Oil (WTI and Brent)
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ULS Diesel, RBOB Gasoline and Low Sulphur Gas Oil
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Soybeans
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Soybean Oil and Soybean Meal
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Capped Notes with Absolute Return Buffer
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TS-11
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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No designated contract may constitute less than 0.4% of the Index; designated contracts which constitute less than 0.4% of the Index will be set to zero. The related contracts are not included in the Index for the related year, and none of the Index calculation procedures that follow are performed with respect to these Commodities. The disregarded interim percentages generally are allocated equally to other commodities not affected by this rule, while treating commodity sectors as one asset when distributing the excess.
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No single commodity together with its derivatives (together, a commodity sector) (e.g., crude oil together with ULS Diesel and unleaded gasoline or soybeans together with soybean meal and soybean oil), may constitute more than 25% of the Index. Any excess weight is generally allocated equally to other commodities not affected by this rule, while treating commodity sectors as one asset when distributing the excess.
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No single commodity (e.g., natural gas or silver) may constitute more than 15% of the Index (note that both crude oil designated contracts and both wheat designated contracts are considered together as one commodity for this purpose). Any excess weight is generally allocated equally to other commodities not affected by this rule, while treating commodity sectors as one asset when distributing the excess.
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No related group of commodities designated as a commodity group above (e.g., energy, precious metals, livestock, or grains) may constitute more than 33% of the Index. Any excess weight is generally allocated equally to other commodities not affected by this rule, while treating commodity sectors as one asset when distributing the excess..
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Gold and silver will be given a weight equal to their CLPs (subject to the 25% commodity sector and 15% commodity limits). The sum of the difference between weights based on the interim percentage and the weights based on the CLPs generally will be allocated to the other commodity sectors equally, while treating commodity sectors as one asset when subtracting the excess.
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No single commodity (e.g., natural gas, silver) may constitute less than 2% of the Index. If one or more single commodities have a weight less than 2% of the Index, the sum of the difference between the 2% and the actual weights generally will be allocated to the other designated contracts equally and reallocated so that no single commodity has a weight less than 2%.
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The ratio of the interim percentage to the CLP for a designated contract may not exceed 3.5:1. The excess weight for all affected designated contracts is aggregated, and is generally allocated equally to other commodities with such a ratio below a certain number, currently set at 2.0.
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Capped Notes with Absolute Return Buffer
|
TS-12
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Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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●
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termination or suspension of, or material limitation or disruption in, the trading of any futures contract or first nearby futures contract used in the calculation of the Index on that day,
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the settlement value of any futures contract used in the calculation of the Index reflects the maximum permitted price change from the previous day’s settlement value,
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●
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the failure of an exchange to publish official settlement values for any futures contract used in the calculation of the Index, or
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with respect to any futures contract used in the calculation of the Index that trades on the LME, a business day on which the LME is not open for trading.
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Capped Notes with Absolute Return Buffer
|
TS-13
|
Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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Capped Notes with Absolute Return Buffer
|
TS-14
|
Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
|
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Capped Notes with Absolute Return Buffer
|
TS-15
|
Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
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●
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the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or any other family relationship not directly above or below the individual investor;
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●
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a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the investor’s household as described above; and
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●
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a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust generally cannot be aggregated together with any purchases made by a trustee’s personal account.
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Capped Notes with Absolute Return Buffer
|
TS-16
|
Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
|
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Capped Notes with Absolute Return Buffer
|
TS-17
|
Capped Notes With Absolute Return Buffer
Linked to the Bloomberg Commodity IndexSM, due January , 2024
|
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■
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There is no statutory, judicial, or administrative authority directly addressing the characterization of the notes.
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■
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You agree with us (in the absence of an administrative determination, or judicial ruling to the contrary) to characterize and treat the notes for all tax purposes as a single financial contract with respect to the Index.
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■
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Under this characterization and tax treatment of the notes, a U.S. Holder (as defined beginning on page 38 of the prospectus) generally will recognize capital gain or loss upon maturity or upon a sale or exchange of the notes prior to maturity. This capital gain or loss generally will be long-term capital gain or loss if you held the notes for more than one year.
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■
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No assurance can be given that the Internal Revenue Service (IRS) or any court will agree with this characterization and tax treatment.
|
Capped Notes with Absolute Return Buffer
|
TS-18
|